BILL NUMBER: SB 575 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Wright
(Coauthor: Assembly Member Strickland)
FEBRUARY 23, 1999
An act to amend Section 1366 of the Civil Code, and to repeal and
add Section 8724 of the Corporations Code, relating to common
interest developments.
LEGISLATIVE COUNSEL'S DIGEST
SB 575, as introduced, Wright. Common interest developments.
Existing law, the Davis-Stirling Common Interest Development Act,
prohibits the board of directors of a common interest development
association from imposing regular or special assessments that exceed
specified limits without a vote of the owners of the association, as
specified. Assessment increases necessary for emergency situations,
including an extraordinary expense required by a court order, are
excepted from this limitation.
This bill would limit the applicability of the exception for
extraordinary expenses required by court order, as specified. It
would also make a technical, nonsubstantive change.
Existing law prohibits, without the approval of 100% of the
members of an owners' association that is incorporated as a nonprofit
mutual benefit corporation, the owners' association or any person
acting on its behalf, that is obligated to provide management,
maintenance, preservation, or control of a lot, parcel, area,
apartment, or unit, from transferring all or substantially all of its
assets or filing a certificate of dissolution.
This bill would revise and recast this provision to exempt the
dissolution of the association from this prohibition if specified
conditions are met.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1366 of the Civil Code is amended to read:
1366. (a) Except as provided in this section, the association
shall levy regular and special assessments sufficient to perform its
obligations under the governing documents and this title. However,
annual increases in regular assessments for any fiscal year, as
authorized by subdivision (b), shall not be imposed unless the board
has complied with subdivision (a) of Section 1365 with respect to
that fiscal year, or has obtained the approval of owners,
constituting a quorum, casting a majority of the votes at a meeting
or election of the association conducted in accordance with Chapter 5
(commencing with Section 7510) of Part 3 of Division 2 of Title 1 of
the Corporations Code and Section 7613 of the Corporations Code.
For the purposes of this section, "quorum" means more than 50 percent
of the owners of an association.
(b) Notwithstanding more restrictive limitations placed on the
board by the governing documents, the board of directors may not
impose a regular assessment that is more than 20 percent greater than
the regular assessment for the association's preceding fiscal year
or impose special assessments which in the aggregate exceed 5 percent
of the budgeted gross expenses of the association for that fiscal
year without the approval of owners, constituting a quorum, casting a
majority of the votes at a meeting or election of the association
conducted in accordance with Chapter 5 (commencing with Section 7510)
of Part 3 of Division 2 of Title 1 of the Corporations Code and
Section 7613 of the Corporations Code. For the purposes of this
section, quorum means more than 50 percent of the owners of an
association. This section does not limit assessment increases
necessary for emergency situations. For purposes of this section, an
emergency situation is any one of the following:
(1) An extraordinary repair or maintenance expense
required by an order of a court.
(2) An extraordinary expense necessary to repair or maintain the
common interest development or any part of it for which the
association is responsible where a threat to personal safety on the
property is discovered.
(3) An extraordinary expense necessary to repair or maintain the
common interest development or any part of it for which the
association is responsible that could not have been reasonably
foreseen by the board in preparing and distributing the pro forma
operating budget under Section 1365. However, prior to the
imposition or collection of an assessment under this subdivision, the
board shall pass a resolution containing written findings as to the
necessity of the extraordinary expense involved and why the expense
was not or could not have been reasonably foreseen in the budgeting
process, and the resolution shall be distributed to the members with
the notice of assessment.
(4) An extraordinary expense in making the first payment of the
earthquake insurance surcharge pursuant to Section 5003 of the
Insurance Code.
(c) The association shall provide notice by first-class mail to
the owners of the separate interests of any increase in the regular
or special assessments of the association, not less than 30 nor more
than 60 days prior to the increased assessment becoming due.
(d) Regular and special assessments levied pursuant to the
governing documents are delinquent 15 days after they become due. If
an assessment is delinquent the association may recover all of the
following:
(1) Reasonable costs incurred in collecting the delinquent
assessment, including reasonable attorney's fees.
(2) A late charge not exceeding 10 percent of the delinquent
assessment or ten dollars ($10), whichever is greater, unless the
declaration specifies a late charge in a smaller amount, in which
case any late charge imposed shall not exceed the amount specified in
the declaration.
(3) Interest on all sums imposed in accordance with this section,
including the delinquent assessment, reasonable costs of collection,
and late charges, at an annual percentage rate not to exceed 12
percent interest, commencing 30 days after the assessment becomes
due.
(e) Associations are hereby exempted from interest-rate
limitations imposed by Article XV of the California Constitution,
subject to the limitations of this section.
SEC. 2. Section 8724 of the Corporations Code is repealed.
8724. Without the approval of 100 percent of the members, any
contrary provision in this part or the articles or bylaws
notwithstanding, so long as there is any lot, parcel, area, apartment
or unit for which an owners association (as defined in Section
11003.1 of the Business and Professions Code and created in
connection with any of the forms of development referred to in
Section 11004.5 of the Business and Professions Code) is obligated to
provide management, maintenance, preservation or control:
(a) The owners association or any person acting on its behalf
shall not:
(1) Transfer all or substantially all of its assets; or
(2) File a certificate of dissolution; and
(b) No court shall enter an order declaring the owners association
duly wound up and dissolved.
SEC. 3. Section 8724 is added to the Corporations Code, to read:
8724. (a) Notwithstanding any contrary provision in the governing
documents of a common interest development, so long as there is any
lot, parcel, area, apartment, or unit for which an incorporated
association is obligated to manage, maintain, preserve, or control,
the association may not do either of the following without the
approval of 100 percent of the members:
(1) Transfer all or substantially all of its assets.
(2) File a certificate of dissolution.
(b) No court shall enter an order declaring the association duly
wound up and dissolved.
(c) Notwithstanding subdivision (a), an association may be
dissolved pursuant to Chapter 15 (commencing with Section 8510),
Chapter 16 (commencing with Section 8610), and Chapter 17 (commencing
with Section 8710) if all of the following conditions are met:
(1) The association is insolvent.
(2) Alternate arrangements have been made to provide for the
continuing management, maintenance, preservation, or control of any
lots, parcels, areas, apartments, or units that the association is
otherwise obligated to manage, maintain, preserve, or control.
(3) A majority of all the members of the association approve the
dissolution.
(d) For purposes of this section, "common interest development,"
"association," and "governing documents" shall have the same meaning
as these terms are defined in Section 1351 of the Civil Code.